S.R. BROTHERS,MUMBAI vs. ADDL.C.I.T. 19(3), MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) The assessee as well as the Revenue are in cross appeal for Assessment Year 2009-10 against the impugned order dated 08/11/2012, whereas, the Revenue is in appeal for A.Y. 2010-11 against the impugned order dated 28/08/2013 of the ld. First Appellate Authority.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee earned income of Rs.10,34,269/- from mutual fund dividend and claimed the same as exempt u/s 10(35) of the Act. As per the assessee, no expenditure was incurred for earning the dividend income. However, the ld. Assessing Officer, by following the decision from Hon’ble jurisdictional High Court in Godrej & Boyce Mfg. Company Ltd. vs DCIT 234 CTR 1 (Bom.) and in view of section 14A read with Rule 8D of the rules made disallowance of Rs.2,52,179/- which was affirmed by the ld. Commissioner of Income Tax (Appeals). So far as, the disallowance is concerned, the ld. counsel for the assessee has also no grievance but the contention raised before us is that it should be reasonable. The assessee is also directed to establish the nexus and also whether own funds were invested in mutual fund or borrowed funds were also invested. We also find that the fund borrowed and owned by the assessee, were mixed up. So far as, the reasonableness of disallowance is concerned, we direct

4 M/s S.R. Brothers, & 6148/Mum/2013 the ld. Assessing Officer to examine the claim of the assessee and make reasonable disallowance, as per law and further in the light of the decisions in the case of CIT vs HDFC Bank and CIT vs Reliance Utilities and Power Ltd. 313 ITR 340 (Bom.). This ground of the assessee is allowed for statistical purposes.

3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that from the profit & loss account of the assessee, it was observed by the ld. Assessing Officer that the assessee claimed Rs.87,12,544/-as foreign commission on which TDS has not been deducted. On asking by the Assessing Officer, the assessee vide letter dated 12/01/2011, explained his position by placing reliance upon Board Circular No.786 dated 07/02/2000. However, the ld. Assessing Officer was of the view, that the Circular is retrospective in operation. The contention of the assessee was considered by the ld.

5 M/s S.R. Brothers, & 6148/Mum/2013 Commissioner of Income Tax (Appeals), wherein, following the aforesaid decision of the Tribunal dated 07/12/2009 (ITA No.6133/Mum/2002) holding that withdrawal of earlier circular with effect from 22/10/2009 has no bearing in A.Y. 1998-99. We are of the view that unless and until made specifically effective retrospectively, the Circular is prospective in nature, thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals), consequently, the appeal of the Revenue is dismissed.

4.1. The crux of argument advanced on behalf of the Revenue, is identical to the ground raised. On the other hand, the ld. counsel for the assessee, defended the conclusion arrived at in the impugned order.

4.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that from perusal of the profit & loss account of the assessee, it was noticed by the Assessing Officer that the assessee has claimed payment of commission on export of Rs.51,11,288/- on which no tax was deducted at source. The assessee was asked to furnish the details with respect to services rendered

6 M/s S.R. Brothers, & 6148/Mum/2013 by the recipient and the rates on which such commission was paid. The assessee filed the details, however, the ld. Assessing Officer was not satisfied with the reply of the assessee dated 17/12/2012, which has been reproduced at page 4 onwards of the assessment order, wherein, the crux of the submission is that the commission paid by the assessee on its export is not liable to tax in India, thus, there is obligation to deduct tax at source in India. The Assessing Officer made the disallowance by holding that the assessee was to deduct TDS and thus, he made disallowance u/s 40(a)(i) of the Act. On appeal, before the ld. Commissioner of Income Tax (Appeals), the factual matrix was considered and it was held that the facts of the case of the assessee are different and he deleted the disallowance. The Revenue is aggrieved and is in appeal before this Tribunal.

4.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the totality of facts, clearly indicates that the agents did not render any managerial, consultancy or technical services and the only carried out liaison and procured export orders and the assessee was using the services of overseas commission agent. There is no permanent establishment of such non-resident in India, thus, the amount in question did not accrue in India, therefore, there was no need to deduct TDS. No other contrary facts

7 M/s S.R. Brothers, & 6148/Mum/2013 were brought to our notice substantiating the version of the ld. Assessing Officer. The ld. Commissioner of Income Tax (Appeals) has duly considered various decisions on identical facts. In fact, services were rendered abroad, therefore, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals).

Finally, the appeal of the assessee is allowed for statistical purposes, whereas, the appeals of the Revenue are dismissed.

This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 21/12/2015.